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Author: Phileo Big red star, 1000 posts Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: of 265  
Subject: The most meaningful post Date: 2/6/2002 12:39 PM
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Not only is this post the most read in all of Fooldom, but I can actually relate to this person.
I started out investing with the same attitudes as this person. I saw Margin investing as a win win method for increasing the magnitude of your returns. I also read about how it would also magnify your losses, but dimissed that possibility. Nah, it would never happen to me, I thought, I would be careful enough. I would know how to handle the risk.
I originally had a cash account with my discount brokerage, but swept up by the tantalizing allure of potential 10-baggers and lucrative dot.com's, I applied for a margin account without hesitation. At first, things went well, but back in the winter of 99, everything was going up, so it wasn't that difficult to make money on stocks. But around the spring of 2000, the market put in a top without anyone believing nor realizing that it had put in a top. And then the bear took over. That's when I began to lose some money on margin and started exhibiting the same kind of denial that that poster went through. But it wasn't until I came across this post that I changed my attitude towards margin investing.

http://boards.fool.com/Message.asp?mid=12251371

I can't explain how I came across that post before I lost all of my money. I was still kind of amazed at the timing of how everything happened. Needless to say, after reading that post, I took the pain of selling all of my stocks (most of them at a loss), and got rid of my margin loans. I wasn't wiped out, but since I exchanged all of my stocks for cash, I had to pretty much start over and rethink everything about investments, time frames, margins, etc.

I still use some margin investing today, it's not like I've totally banished it. But the impact from this post has been real in my investment life. I no longer see margin investing as the infallible ticket to riches. I now use margin investing only when I have to and even then only on one stock. I also plan ahead so that the one single stock bought on margin does not significantly impact my portfolio if the company behind the stock went bankrupt.

The unfortunate lesson that that poster experienced has helped me greatly in learning how to avoid going thru a similar experience myself


Thx.
Cheers,
Albert
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